June 15 (Bloomberg) -- Richard Branson’s Virgin Group Ltd.,
the travel and entertainment conglomerate, wants to enter the
U.S. rental-car business by buying the assets of the Advantage
brand that Hertz Global Holdings Inc. was ordered to divest.

Virgin sent a letter dated June 7 to the U.S. Federal Trade
Commission expressing its interest as the FTC decides whether to
give final approval to Hertz’s $2.3 billion acquisition in
November of Dollar Thrifty Automotive Group Inc. The agency’s
concern that Advantage may not be viable with its new owners has
delayed that decision, and commissioners can vote to rescind the
sale and order the assets resold to another company.

“Virgin looks at opportunities where we believe our brand
and service can make a difference for the customer and shake up
a market,” said Nick Fox, a spokesman for closely held Virgin,
who confirmed the letter. “We feel the car-rental sector is
Virgin territory.”

Virgin, which Branson started in 1970 as a mail-order
record shop, now is a global conglomerate with 2011 revenue of
about 13 billion euros ($21 billion). London-based Virgin has
since taken its style, characterized by a cheeky personality and
value-priced, high-touch service, into banking, book publishing,
air and space travel, hotels, and mobile-telephone service.

Virgin Atlantic airline, for example, offers free drinks
and meals in all cabins, and the U.S. airline, Virgin America,
has a safety video narrated by a “half snarky pal, half
friendly host” who “says things like, ‘For the .0001 percent
of you who have never operated a seatbelt before, it works like
this,’” according to an Interbrand blog item about the airline.

Shares Drop

Now, Virgin wants to get into the rental-car business, and
it’s trying to use a delay in the final approval of Hertz’s sale
of Advantage to swoop in and take over the assets and operate
them under the Virgin brand.

Hertz fell 3 percent to $24.43 yesterday in New York while
Avis dropped 3.4 percent to $30.61.

“Clearly the stock is reacting to the fact that Virgin has
great brand recognition and they have a history of being a
disruptive force,” Fred Lowrance, senior research analyst with
Avondale Partners LLC in Nashville, Tennessee, said in an
interview.

The Advantage assets represent a way to gain quick access
to the largest airports in the U.S., Lowrance said. Ordinarily,
a company would have to bid for each airport counter as it
became available.

The FTC ordered Park Ridge, New Jersey-based Hertz to sell
Advantage and 29 additional airport locations as a condition of
acquiring Dollar Thrifty. By doing so, the FTC aimed to create a
competitor strong enough to keep the three big companies, No. 2
Hertz, Avis Budget Group Inc. and closely held market leader
Enterprise Holdings Inc. from having too much power.

Slow Approval

Under normal circumstances, the FTC would have approved the
consent decree in December following a 30-day comment period

Six months later, the FTC hasn’t completed its approval of
the Dollar Thrifty transaction as it weighs the strength and
viability of the Advantage brand under its new ownership, people
familiar with the matter have said. Hertz sold Advantage to
Macquarie Group Ltd.’s private-equity arm in a joint venture
with Franchise Services of North America Inc. under a consent
agreement with the FTC.

Price Increases

“This is a real pocketbook issue for everyday people,”
then-FTC Chairman Jon Leibowitz said in a statement announcing
the November agreement. “Today’s bipartisan action by the FTC
will ensure that consumers are not forced to pay higher prices
for rental cars when they travel.”

Since then, the three big rental companies, which dominate
the airport car-rental market, have raised prices at a rate not
seen since the recession.

Avis, which boosted prices twice in June, said it has
“continued to aggressively implement pricing increases in North
America.” In the first quarter, Avis raised prices six times
and attributed it in part to Hertz’s deal for Dollar Thrifty.

Virgin is working with MCG Global LLC, an investment and
management advisory firm co-founded by Vince Wasik, former
executive vice president of Hertz and a former chief executive
officer of National Car Rental.

Peter Kaplan, a spokesman for the FTC, declined to comment.

Investors and academics have highlighted the opportunity
the top three rental-car companies have to raise prices and
profitability following the transaction.

Prize Winner

“The market significantly underestimates the impact of
Hertz’s recent merger with Dollar Thrifty, which marks the
completion of a 10-year consolidation that dramatically improves
the competitive dynamics of the industry,” three Columbia
business school students wrote in a 93-page report that in April
won the Pershing Square Challenge investment-thesis contest
sponsored by Bill Ackman, the hedge-fund billionaire.

“From the blatant price signaling in earnings call and
conference call transcripts, it is clear that Hertz and Avis are
focused on profitability and keeping the industry’s car-rental
rates high,” Richard Hunt, Stephen Lieu and Rahul Raymoulik
wrote in the report.

The FTC’s bureau of competition has continued to
investigate the Advantage sale using voluntary submissions from
the companies rather than requiring subpoenas or sworn
testimony, said two people familiar with the matter, who asked
not to be identified because the discussions are private.

Staff Recommendation

FTC staff has recommended that the commission approve the
Hertz-Dollar Thrifty consent decree, one of the people said.

Approval requires a majority of the agency’s commissioners,
which currently number four, because the fifth seat remains
vacant after Leibowitz stepped down in January.

Only three commissioners will vote on the matter, because
Josh Wright, a Republican who was confirmed in January, recused
himself, saying he hadn’t been involved with the case, said the
person. Wright declined to say whether he has recused himself.

The FTC had ordered Hertz to divest extra locations in
addition to the Advantage business to protect consumers, citing
the $11 billion spent to rent 50 million vehicles at U.S.
airports each year. Without the divestitures, the merger would
have hurt competition at 72 airports around the U.S., the FTC
said when it initially approved the transaction Nov. 15.

The FTC’s investigation focused on whether Macquarie, the
approved Advantage buyer, was following through on its
commitments to expand and strengthen Advantage after the Dec. 7
ouster of Sanford Miller, an industry veteran who was hired to
run Advantage, two people familiar with the matter said in
April. Macquarie had said in an e-mail to Miller last July that
it didn’t have car-rental experience.